Standing charges on your energy bill: understand how they work

Standing charges

If you’ve ever looked at your gas or electricity bill, you may have noticed the term ‘standing charge’. If so, you might be wondering ‘what is a standing charge’, and do you have to pay it? Read on to find out if you can save money on this common utility charge. 

What is a standing charge?

Energy bills are made up of two parts: 

  • Unit rate – the price you pay for each unit of gas or electricity (measured in kWH)

  • Standing charge – a fixed daily rate

Your unit rate will change from day to day, because it’s dependent on the amount of energy your household consumes. However, a standing charge is a simple flat rate. It stays constant whether you use any energy or not. Even when you’re away from home, the standing charge still applies. 

While unit rates cover the cost of the energy itself, standing charges cover all the other costs suppliers incur as part of their business. This includes the cost of energy network connection, distribution and maintenance. It also includes things like the cost of sending out an employee to take meter readings, and the cost of account administration. 

Standing charges are used to help cover the policy cost of government initiatives, from renewable energy to welfare programmes for vulnerable households. This is why you’ll incur the standing charge whether or not your individual household has used any energy in a given day. It’s meant to pay for the bigger picture of running an energy network. 

On a final note, it’s important when understanding what a standing charge is that there are separate charges for gas and electricity, to cover the costs of these two different networks. 

How standing charges are calculated

If standing charges aren’t related to your own household’s energy use, then how are these figures calculated? This depends. The average costs are:

  • Electricity standing charge: 5p to 60p per day

  • Gas standing charge: 10p to 80p per day

As you can see, there’s quite a big difference between the upper and lower limits of these averages. Remember, these are charged whether or not you use any energy. At the upper limits listed above, you’d be spending £219 on energy each year and £292 on gas, before adding in the cost of your household use. This is why it’s so important to understand standing charges and compare your prices carefully. The average household standing charge is £156 per year, or 14% of energy costs as of May 2018. This can vary widely depending on your location and energy plan.  

Standing charges on prepayment plans are usually lower than this average. When consumers pay for their energy in advance using a prepayment meter, it reduces associated costs of processing payments, issuing paper statements and taking meter readings. The same holds true for smart meters, which automatically submit meter readings to the supplier for greater accuracy and reduced administrative costs. These savings are then passed down to the consumer with lower standing charges. 

All energy tariffs will include a standing charge. This has been a requirement since Ofgem released its Retail Market Review. The basic idea behind this is that if all energy plans follow the same structure, it’s easier for consumers to accurately compare energy prices. However, to get around this regulation energy suppliers can set the standing charge at £0 if they wish. 

Are there energy plans with no standing charge?

While all energy plans have standing charges included, there are some suppliers offering a £0 rate. This means that although you’ll still see the standing charge listed on your utility bill, it won’t cost you any money. Although there are suppliers out there that offer plans with no standing charge, the choice is generally quite limited. 

How do standing charges work with a prepayment meter?

As mentioned earlier, your gas and electricity standing charges might be lower if you have a prepayment meter. This is because a prepayment meter takes out some of the administrative work involved in supplying your property with power, like sending out physical bills or checking meter readings in person. However, you will still need to pay the standing charge. This flat rate is factored into your credit each time you top up your meter, and any outstanding standing charges will roll over to be paid the next time you top it up. 

Pros and cons of not paying a standing charge

As you compare energy plans, it’s certainly worth looking carefully at the standing charges. There are some situations where it’s better to choose an option with no standing charge. Here’s a closer look at the advantages and disadvantages of paying standing charges. 

Pros of not paying standing charges

If you have a second home or flat that stands vacant for a good percentage of the year, it doesn’t make sense to pay for standing charges. In this case, choosing a no standing charge plan could be a great option. You only pay for energy you use, so it will save you from paying those monthly rates during those times when you’re not using any energy. 

Cons of not paying standing charges

The general downside of plans that eliminate standing charges is that they tend to make up for it in other ways. Your overall energy rate will be higher to balance out the lack of a standing charge. It’s important to look at both figures to determine how the plan would realistically fit into your budget. For medium to high energy users, paying a standing charge can reduce the energy unit rate which ensures lower utility bills over time. 

Standing charges for vacant properties

Homeowners with properties that stand empty for prolonged periods of time can benefit from not paying the standing charge. You may be able to have your electricity or gas standing charge waived by contacting the empty property’s supplier. Be prepared to submit meter readings proving that no energy is being used if you choose to go this route. Many suppliers are happy to waive the standing charges for a set period of vacancy, because it’s easier than cancelling the supply entirely. 

There are additional ways to save money on energy costs if you spend lots of time away from home or own a currently vacant second property. Upgrade windows to double-glazed designs with secure locks to both insulate and secure the home – you can add laminated glass or glazing film as added protection from the elements. If you leave your home unoccupied during the colder months, try setting your thermostat to a frost setting. You could also set the heating on a timer to prevent frozen pipes or other damage while you’re away. 

Cut your energy bills

Whether or not you’re currently paying a standing charge, it doesn’t hurt to compare energy prices to find out if you could be paying less. Switching supplier only takes a few minutes of your time and can cut your energy bills by a couple of hundred pounds over the course of the year. When you compare plans, you’ll see a breakdown not only of the cost of energy per unit, but also of the electricity standing charge or gas standing charge.

Pay close attention to these and how they balance out to make up the overall tariff, as well as any exit fees should you wish to change plans again down the road. It’s also worth looking at other features of the energy plan to see if they might save you money, like reduced overnight rates or fixed rates over time.  

The standing charge meaning is simple; it’s a flat daily fee that covers all the associated costs of supplying your home with gas and electricity. Because this is separate from the cost of your daily energy use, it’s important to consider your household habits to find the best plan for you. A low or zero electricity standing charge could be a great option if you’re away on business for a good percentage of the week, for example. But if you work from home or have a large family, it’s probably better to seek out lower per unit rates and pay the average standing charges. The less energy you use, the higher the percentage of your bill will apply to standing charges. 

Bjorn GriffithDec 9th 2019